ABF confirms £75m Kingsmill-Hovis merger

(Image: Getty/kazoka30)

ABF’s £75m Hovis buyout could reshape UK bread market

Kingsmill-Hovis merger

• ABF to buy Hovis for £75m
• UK’s biggest bread brand to be formed
• Sales down, losses mounting for both companies
• £50m in cost savings expected
• Job cuts likely, union demands protections
• CMA review underway, decision could take a year

Associated British Foods (ABF), owner of Kingsmill, has agreed a deal to buy rival Hovis. If approved by regulators, the £75m (€86.3m) acquisition, will create the UK’s largest bread brand.

Rumours of an imminent deal spread like wildfire through the industry last week and, as is often the case, the rumours were true.

The deal follows a decades-long decline in the popularity of packaged sliced breads, leaving both Hovis and Kingsmill struggling.

Sales at Hovis fell by almost 9% to £447m in the year to 28 September 2024. Company representatives said the brand had been battling “extreme price volatility across key raw materials” during the year.

Meanwhile, ABF’s bakery division, Allied Bakeries, which includes Kingsmill, incurs annual losses of about £30m, despite sales of about £400m, according to analysts at Panmure Liberum.

ABF has said the tie-up would combine the production and distribution activities of the two businesses, which is expected to lead to job losses, and an estimated £50m in annual cost savings.

“This transaction will create a UK bakeries business that is both profitable and sustainable over the long term,” said George Weston, chief executive of Associated British Foods, in a statement. “Supporting the Hovis and Kingsmill brands with well-invested and efficient operations will also enable innovation and growth. This solution will create value for shareholders, provide greater choice for consumers and increase efficiencies for customers.”

However, Unite the Union has been quick to respond to the news, with general secretary Sharon Graham making the following statement.

“While there is still a long way to go before any buyout happens, Hovis and Kingsmill must ensure that jobs are protected. Unite represents workers at both companies and we will not tolerate attacks on jobs, pay or conditions.”

Graham went on to say that Unite will be working to ensure that Hovis and Kingsmill “fully involve the union” in any decisions that impact its members.

The merger is now in the hands of the Competition and Markets Authority, which will decide if the merged brands face sufficient market competition on price and quality.

It’s speculated that a decision could take up to a year.

The Hovis-Kingsmill merger now joins a growing list of strategic pairings, including Mars-Kellanova and Greencore-Bakkavor. The race is on to adapt, and survive.